Page 9 - MEOG Week 11

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Lebanon explores offshore as chaos rules at home
Lebanon
THE long-discussed drilling of Lebanon’s first offshore well which started on February 27 has come amid high anticipation that a major hydro- carbon discovery could help redress the coun- try’s debt-burdened economy.
However, it is important that as few eggs as possible are placed in that basket until such time as there are definite prospects and steps have been taken to put any putative oil industry on to a firm footing.
The Tungsten Explorer is set to drill at its first exploration well situated some 30 km (16 nauti- cal miles) offshore Beirut and was said to have anchored in Block 4 at Total’s Byblos-1 well.
Total said the drilling would last two months and start at 1,500 metres below sea level. All eyes are pinned on this well, waiting to find out whether it is dry or potentially commercial.
it will take at least three or four months before there is a conclusive result and it is vital to rec- ognise that this is merely an exploration phase.
A consortium composed of energy giants Total, Eni and Novatek was awarded two of Leb- anon’s 10 exploration blocks in 2018: Block 4, and Block 9 near the israeli border.
No date has yet been set for the exploration of Block 9, where drilling has been more contro- versial as israel claims ownership of some of the block. Total had in the past said it was aware of a border dispute affecting less than 8% of Block 9, and would drill away from that area. it is likely that only after results from Block 4 are available that a strategy on how best to probe Block 9 will be finalised.
Lebanon has not yet joined the new group of oil and gas producing countries - in fact, there is still a chance it might never do so. What is even more critical to realise is that even if the stars align for Lebanon and offshore oil and gas is dis- covered — and at a volume that would make its extraction commercially viable for energy com- panies — becoming a new oil and gas producing country will take time.
A striking example of a field coming online in the Eastern mediterranean is the Zohr field, an offshore natural gas field located just off the coast of Alexandria, Egypt which was only found after ten years of failed attempts, a number of dry wells and the selling-off of the area from Total to Eni, who struck gold two months after the pur- chase. Exploration for oil and gas takes times, patience and a degree of luck.
At a time of complete economic meltdown and critical liquidity shortages, Lebanon’s politi- cians would be well advised not to try to position the potentially lucrative oil and gas sector as Leb- anon’s saviour in the making.
A much better way forward would be to enact reforms to support the potential industry and ensure that its benefits are spread across the whole economy.
The drilling initiative comes at a time when Lebanon is in default for the first time in its his- tory, banks are in crisis and the economy is in freefall. But one sector is booming: property. Desperate for a safe haven for their cash, citizens and professional investors have been buying up real estate at levels not seen for years in Lebanon’s previously stagnant property market.
Property sales in January jumped 27% year on year, with a total of 4,668 real estate transac- tions executed, according to the finance minis- try. in December, there were 6,000 transactions in Lebanon totalling $1.1bn.
The boom has been driven by Lebanon’s financial and economic crises, the combination of which meant Beirut’s government defaulted on a $1.2bn Eurobond that matured last monday.
A shortage of dollars has forced commercial banks to introduce harsh restrictions on foreign currency transfers, while account holders face dollar withdrawal limits — in some cases as low as $200 every two weeks — and are unable to transfer cash abroad.
in this unpredictable environment investors have raced to move their funds out of the banks and into property. Lebanon is one of the most indebted countries in the world, with a burden equivalent to 150% of its GDP.
it is in the grips of a severe liquidity crunch that has hampered imports, sparked price hikes and caused the value of the Lebanese pound to plummet on the parallel exchange market.
The shortage of medical supplies and cut- backs in hospital services are perhaps the stark- est effects of the country’s fiscal crisis. The issue has become more urgent in recent weeks as the coronavirus spreads around the globe, leaving health professionals and members of the public fearful of whether Lebanon’s already struggling hospitals can deal with an outbreak.
in these circumstances, drilling for oil is a minor development but it offers a glimmer of brighter days ahead.™
Week 11 18•March•2020 w w w . N E W S B A S E . c o m P9